MG106 Strategic Management
London School of Economics and Political Science
June 25, 2025
VS
1️⃣ What made Blockbuster dominant?
2️⃣ How did Netflix enter and how did Blockbuster react?
3️⃣ How did Netflix evolve its model?
4️⃣ Why did Blockbuster’s response fail?
Framework: WHO-WHAT-HOW
Task: 15 minutes, discuss all questions in teams 🕐
Remember: Use WHO-WHAT-HOW
WHO were their customers? 🤔
Think: What triggered a visit?
WHAT value did they offer? 💰
Was it just movies?
HOW did they deliver? 🏪
Count the costs…
Build the complete WHO-WHAT-HOW picture 📊
WHO 👥
WHAT 🎬
HOW 🏢
Outside option? Movie theater @ $10-15/person 🍿
This model printed money… until it didn’t
How did Netflix answer WHO-WHAT-HOW? 📝
Hint: Look at 1997-1999
Same as Blockbuster ✅
Different ❌
Your verdict? Would this work? 🤷
Quick poll: Who wins? 🗳️
10-14 day cycle vs. 10-minute drive
What changes did they make? 📈
List them out…
| Phase | Change | Why? | Impact |
|---|---|---|---|
| 1999 | Subscription model | Kill transaction friction | 💔 Still failed |
| 2000 | Unlimited + No late fees | Change the game | 🎯 Breakthrough! |
| 2001 | Recommendation engine | Drive to catalog | 💰 Lower costs |
| 2002 | Distribution centers | Overnight delivery | 🚀 Game over |
Key question: Why did EACH change matter? 🤔
What was revolutionary about:
“Unlimited rentals, no late fees, 3 at home”?
🏠 🎬 🎬 🎬
Think: How did this change customer psychology? 🧠
See it? Every piece reinforces the others! 🎯
How did these work together?
📋 Queue → 🤖 Recommendations → 🏭 Distribution → 🤝 Studio deals
Hint: Think inventory management 📦
Timeline check! 📅
Spoiler: Really, really late 🐌
2002: “Online rental? Niche market” 🙄
2004: Finally launches online (copy Netflix) 🐢
2005: Drops late fees (bye $600M!) 💸
2007: Total Access (online + stores) 🏪+💻
2010: 💀 RIP
Question: Could they have won? 🤔
Netflix Costs 💚
Blockbuster Costs 💔
Can you compete when your costs are 10x higher? 📊
The lesson? You can’t be two things at once 🎭
| Blockbuster 🏪 | Netflix 📮 | |
|---|---|---|
| Customer Job | “I need entertainment NOW” | “I want movies ready always” |
| Revenue | Transaction + penalties | Subscription |
| Assets | 9,000 stores (trap!) | Algorithms + warehouses |
| Inventory | Local × 9,000 | National pool |
| Evolution | Couldn’t change | Constantly adapted |
Critical insight: One piece changes = ALL pieces change 🔄
1. Systems beat features 🔗
2. Assets can imprison 🏢➡️⛓️
3. Different jobs = Different models 🎯
4. Speed matters 🏃♂️
Your mission:
Key question: What makes an industry attractive? 🤔
See you tomorrow!
Bring your competitive analysis hat 🎩